Panel Discussion: Hedge Funds: Are they a fixed income substitute during rising rates? Moderator: Thomas Deegan, Clearbrook Global Advisors Panelist: Sam Diedrich, PAAMCO Christopher G. Kirk, CFA, Wellington Management Shawn Steel, CFA, BlackRock 21st National Pension and Institutional Investor Summit Tuesday, November 17, 2015 21st Annual National Pension and Institutional Investment Summit: November 17, 2015 • 19540 Jamboree Road, Suite 400, Irvine, CA 92612 • +1 949 261 4900 IRVINEIRVINE • 19540 Jamboree Road, Suite 400, Irvine, CA 92612 • +1 949 261 4900 • 25 Victoria Street, London SW1H 0EX • +44 20 7593 5360 LONDON • 25 Victoria Street, London SW1H 0EX • +44 20 7593 5360 • 50 Raffles Place, #13-06, Singapore Land Tower, Singapore 048623 • +65 6594 2400 SINGAPORE • 50 Raffles Place, #13-06, Singapore Land Tower, Singapore 048623 • +65 6594 2400 The information included herein is highly confidential, intended for review by the recipient only, and should not be disseminated or be made available for public use or to any other source. Copyright 2000-2015. All rights reserved. DISCLAIMER Pacific Alternative Asset Management Company, LLC (“PAAMCO U.S.”) is the investment funds. An investment in hedge funds includes the risks inherent in an investment in securities, adviser to all client accounts and all performance of client accounts is that of PAAMCO U.S. as well as specific risks associated with the use of leverage, short sales, options, futures, Pacific Alternative Asset Management Company Asia Pte. Ltd. (“PAAMCO Asia”) and Pacific derivative instruments, investments in non-U.S. securities, junk bonds and illiquid investments. Alternative Asset Management Company Europe LLP (“PAAMCO Europe”) are subsidiaries of There can be no assurance that an investment strategy will be successful. The entirety of PAAMCO U.S. “PAAMCO” refers to PAAMCO U.S. and its subsidiaries collectively. AUM for investors’ capital is at risk. 2015 is estimated, unaudited, and subject to change. Limited Transferability. Investors in a Fund have a limited right to redeem or transfer The recipient agrees to use any information that the recipient receives from PAAMCO or a interests in a Fund. In addition, interests are not listed on an exchange and it is not expected representative of PAAMCO (whether received orally or in writing) only for the purpose of that there will be a secondary market for interests. While a Fund offers certain periodic evaluating whether to enter into a relationship, or continue a relationship, with PAAMCO redemption rights, there can be no assurance that a Fund will in fact do so at all or to the whereby PAAMCO provides investment advisory services to recipient. extent necessary to satisfy investor demand for redemptions. The information contained in this document is intended for discussion purposes only. The Early Stage Managers. A Fund may invest a portion of its assets in investment funds information included herein is highly confidential, intended for review by the recipient only, and managed by “early stage managers,” which generally are investment managers that are less should not be disseminated or be made available for public use or to any other source. It is not than two years old and/or have less than $500 million in AUM at the time of initial investment an offer or a solicitation for the sale of a security nor shall there be any sale of a security in any by the first PAAMCO client. Early stage managers may have less experience managing their jurisdiction where such offer, solicitation or sale would be unlawful. An investment with respective investment funds and in operating an investment management firm than other PAAMCO (whether through a commingled fund or on a separate account basis) involves a managers that have been in business for a longer period of time. The relatively shorter degree of risk, and may only be made pursuant to the respective offering documents and operational experience of emerging managers could lead to greater losses for their respective organizational materials governing such investment. Past performance of the clients of investment funds and for a Fund than if a Fund had invested in funds managed by more PAAMCO, or any of its employees or principals, may not be indicative of future results, and experienced managers under similar circumstances. there is no guarantee that targeted performance will be achieved. The entirety of investors’ The criteria used by the academic studies cited herein to define “emerging” or “early stage” capital is at risk. managers may differ in some respects from PAAMCO’s definition of Early Stage Managers as PAAMCO does not make any warranty as to the accuracy, reliability or completeness of follows: figures, opinions, information or generally as to the content of this document and cannot be • HFR reports that, taken as a group, the annualized performance of new hedge funds held responsible for any loss or damage, whether direct or indirect, resulting from or related to (funds younger than 2 years) is greater than that of established hedge funds (funds older the use or consultation of this document or of the information herein. PAAMCO’s processes than 2 years) across most time periods. HFR also reports that new hedge funds’ are constantly evolving and there can be no assurance that any process described in this outperformance of established hedge funds is most pronounced and significant at lower piece will continue to be employed in the future in the manner described. asset levels. (HFR 2011.Q3 Market Microstructure Report (2011)) All information contained herein regarding any PAAMCO fund (the “Fund”) is subject in its • Aggarwal and Jorion research shows that hedge funds generally perform stronger during entirety to information contained in its final Private Placement Memorandum and organizational their first two years of existence than in their later years. (Aggarwal, R.K., Jorion, P., The documents (“Memorandum”). An investor should consider a Fund‘s investment objectives, performance of emerging hedge funds and managers. Journal of Financial Economics risks, charges and expenses carefully before investing. This and other important information (2010), doi:10.1016/j.jfineco.2009.12.010.) about a Fund can be found in its Memorandum. Please read the Memorandum carefully before investing. GIPS. PAAMCO claims compliance with the Global Investment Performance Standards (GIPS). PAAMCO received verification of this status in 2014. To receive a list of PAAMCO While PAAMCO is responsible for strategy allocation of client portfolios, the managers that composite descriptions and/or a presentation that complies with the GIPS standards, contact PAAMCO hires determine the prices and quantities traded for all underlying securities. [email protected]. Material is Current Only as of Date Indicated. The information in this material is only current “PAAMCO” refers to the GIPS-compliant firm which includes PAAMCO U.S. and its as of the date indicated, and may be superseded by subsequent market events or for other subsidiaries collectively. PAAMCO U.S. is a registered investment adviser formed in March reasons. The information in this document may contain projections or other forward-looking 2000. PAAMCO is an institutional fund of hedge funds investment firm dedicated to offering statements regarding future events, targets or expectations regarding a Fund. There is no strategic alternative investment solutions to institutional investors around the world. PAAMCO's guarantee that the target allocations or other characteristics of a Fund will be realized or clients include large public and private pension plans, foundations, endowments, and financial achieved, and they may be significantly different than that shown here. Statements concerning institutions. financial market trends are based on current market conditions, which will fluctuate. Any forward-looking statements are reflected as of the date they are made, and PAAMCO assumes Pacific Alternative Asset Management Company is a registered trademark in the United no duty and does not undertake to update forward looking statements. States, Canada, Japan, Singapore and Australia. PAAMCO is a registered trademark in the United States, Canada, Europe, Japan and Australia. Pacific Alternative Asset Management Regulatory Status. The applicable Fund is not registered under the U.S. Investment Company Company Europe and PAAMCO Europe are registered trademarks in Europe. Pacific Act of 1940, as amended, in reliance on an exception thereunder. Interests in the applicable Alternative Asset Management Company Asia and PAAMCO Asia are registered trademarks in Fund have not been registered under the U.S. Securities Act of 1933, as amended, or the Singapore. Separate Fund Platform and SFP are registered trademarks in the United States. securities laws of any state and are being offered and sold in reliance on exemptions from the completeAlpha is a registered trademark in Singapore, Japan, the EU, and the U.S. and it is a registration requirements of said Act and such laws. These securities shall not be offered or trademark of PAAMCO in Australia. sold in any jurisdiction in which such offer, solicitation or sale would be unlawful until the requirements of the laws of such jurisdiction have been satisfied. PAAMCO U.S. is legally structured as an LLC, so owners are technically “members.” Non-US ownership is via local vehicles. PAAMCO may at times operate representative offices in 3 Hedge Funds Entail Risks. Hedge funds are speculative investments